Investment Manager License: A Guide to Licensing and Regulations

Obtaining an investment manager license is a crucial step for individuals and firms looking to manage investments for clients.

The license requirements vary by jurisdiction, but most require a combination of education, experience, and passing a professional exam.

In the United States, the Securities and Exchange Commission (SEC) regulates investment managers and requires them to register with the Commission.

Registration involves providing detailed information about the investment manager, including their business practices and fees.

To become a licensed investment manager, you'll need to meet certain requirements. You must be legally classified as a sole proprietorship, commercial enterprise, or cooperative and registered with the commercial register.

In addition to this, you'll need to demonstrate adequate risk management and internal controls, as well as sufficient equity capital or securities. This will give you a solid foundation to manage investments effectively.

To secure a fund manager license, you'll first need to obtain a Global Business Corporation (GBC) license. This is a crucial step in setting up and licensing a fund manager or Collective Investment Scheme (CIS) Manager Company in Mauritius.

Here are the key licensing requirements:

The Series 6 License is administered by the Financial Industry Regulatory Authority, or FINRA, and enables financial advisors to sell packaged securities like mutual funds and variable annuities.

A financial advisor with only a Series 6 may not sell individual stocks or bonds, so it's often used as a stepping stone to more comprehensive licenses like the Series 7.

Many advisors start by obtaining a Series 6 before moving on to the Series 7, which can provide hands-on experience and allow them to sell a limited range of products while studying for the Series 7.

The Series 7 license is the gold standard of financial advisor licenses, enabling advisors to sell nearly every type of investment product.

It's administered by FINRA and authorizes the sale of packaged securities, even if you don't carry an active Series 6 license.

The Series 7 license does not cover commodities, which require a Series 3 license, or real estate and life insurance, which have their own licenses.

Obtaining a Series 7 license is the most difficult for financial advisors to achieve, making it a significant accomplishment.

Starting in October 2018, FINRA created a new Securities Industry Essentials (SIE) exam that became a co-requisite to the revised Series 7 exam, requiring candidates to pass both exams to obtain their general securities registration.

The Series 63 License is a must-have for financial advisors looking to conduct business in any state. It's an exam you'll need to pass in addition to the Series 7 or Series 6.

The Series 63 License exam is shorter and easier than the other two, lasting only 75 minutes. But don't let that fool you - it covers a lot of detailed information about laws and regulations that can be tricky to remember.

This exam is all about minutiae, covering the specifics of state laws and regulations that financial advisors need to know.

Mauritius is a popular destination for investment and fund management due to its modern and flexible laws.

To set up a fund manager license in Mauritius, you first need to secure a Global Business Corporation (GBC) license.

The Mauritius Securities Act 2005 and the Securities Regulations of 2008 on Collective Investment Schemes and Closed-end Funds allow for a Fund Manager or Collective Investment Scheme (CIS) Manager Company to be set up and licensed in Mauritius.

There are three categories of Mauritius Fund Manager licenses, but it's essential to understand the different options and choose the most suitable one for your needs.

A Mauritius fund manager license offers several advantages, including low operational costs and a low tax rate of maximum 3% on net profits.

The minimum capital requirement for a fund management company in Mauritius is MUR 1 Million, which is approximately US$ 30,000.

Mauritius also has a well-placed international financial centre, making it easy to access African markets.

Securing a Mauritius license can be a complex process, but it's definitely achievable with the right guidance. Tetra Consultants has more than a decade of experience in advising clients on securing a Mauritius Fund Manager license.

To begin, you'll need to incorporate a new Mauritius company, which can be managed by Tetra Consultants' team of experts. They'll handle all the necessary paperwork and ensure everything is in order.

Tetra Consultants will also assist with opening a corporate bank account, which is a crucial step in the licensing process. This will help you establish a solid financial foundation for your business.

The team at Tetra Consultants will draft the legal documents required for the fund manager license application, including any necessary contracts or agreements. They'll make sure everything is compliant with Mauritian regulations.

Securing a Mauritius Fund Manager license typically involves a range of documents, including:

By working with Tetra Consultants, you can rest assured that your application will be managed from start to finish, including the final step of securing the fund manager license.

To determine if you need a licence as a portfolio manager, it's essential to understand the commercial nature of your activity. You're considered to be operating on a commercial basis if you generate gross earnings of more than CHF 50,000 per calendar year.

To give you a better idea, here are the specific thresholds that define commercial activity:

It's worth noting that certain assets linked to exemptions to licensing requirements are not taken into account when determining commercial activity.

To determine if you need a licence as a portfolio manager, you need to understand the commercial nature of your activity. Portfolio managers who carry out their activity on a commercial basis require a licence.

If you generate gross earnings of more than CHF 50,000 per calendar year, you're considered to be operating on a commercial basis. This is a significant threshold, and it's worth noting that certain assets linked to exemptions to licensing requirements are not to be taken into account here.

Establishing business relationships with more than 20 contractual partners per calendar year can also indicate commercial activity. These partners should be people you have a regular business relationship with, not just one-off activities.

Having unlimited power of disposal over assets belonging to others, which exceed CHF 5 million at any given time, is another indicator of commercial activity. This is a substantial amount of money, and it's clear that the law is trying to protect investors by requiring a licence in such cases.

Here are the specific criteria for determining commercial activity:

It's worth noting that certain exemptions apply to managers of the assets of collective investment schemes or occupational pension schemes below the defined thresholds. Their activities are always deemed commercial, regardless of their scope.

To become a CIS Manager, you'll need to obtain the most comprehensive fund manager license in Mauritius. The CIS Manager Licence requires that the fund manager be engaged solely in the business of management of collective investment schemes.

The Financial Services Commission (FSC) has specific requirements for applicants, including being a body corporate and meeting the requirements relating to eligibility, fit and proper, duties and obligations, rules of ethics, and other conditions as specified in FSC Rules.

You'll be allowed to carry out various activities for the management of a Collective Investment Scheme (CIS), including all administrative services required by the scheme and managing the portfolio.

Here are some of the specific activities you'll be authorized to perform:

To operate as a CIS Manager, you'll need to meet certain financial requirements, including a minimum stated capital of US$ 30,000 and an annual minimum expenditure of US$ 30,000 in Mauritius.

The Unrestricted type of license is a popular choice for those who want to manage a portfolio of securities and advise on securities transactions. This license allows you to use various means of communication, including printed materials.

To obtain an Unrestricted license, you'll need to meet certain requirements. The minimum stated capital is US$ 18,000, and you must record an annual minimum expenditure of US$ 25,000. You'll also need to hire at least one employee with 4 years of relevant experience in the investment business.

Insurance cover is not mandatory, but it's highly recommended to protect your business. In fact, Tetra Consultants suggests that international clients purchase insurance to safeguard their interests.

The application processing fee for an Unrestricted license is US$ 500, and the annual fee to the FSC is US$ 1,900. These fees are non-negotiable, so be sure to factor them into your budget.

Here's a summary of the Unrestricted license requirements:

To submit an application for an investment manager license, you'll need to use FINMA's survey and application platform, known as EHP.

The first step is to go through the authorization process, which is outlined in more detail on the 'Licensing process' page.

You can choose from various types of authorization, including those for banks and securities firms, insurers, and asset management.

To give you a better idea of the options, here's a list of the different types of authorization available:

Mauritius is a hub for investment manager license, offering numerous advantages. One of the key benefits is its modern and flexible laws.

To become a licensed investment manager, you'll need to meet certain requirements. In the British Virgin Islands (BVI), for example, an investment manager or advisor must be a BVI company or limited partnership to apply for an "Approved Manager" license.

Here are some key features of an Approved Manager license:

The benefits of becoming an Approved Manager include less onerous ongoing obligations compared to becoming licensed under the Securities Investment Business Act (SIBA).

Mauritius is a top choice for Investment Houses and Fund sponsors due to its cost-effective environment. The country has a modern and flexible legal system that supports fund management companies.

One of the key advantages of Mauritius is its low capital requirement, which is only MUR 1 Million (approximately US$ 30,000). This makes it easy for companies to set up and start operating.

The tax rate in Mauritius is also very low, with a maximum of 3% on net profits. This is a significant advantage for fund management companies looking to minimize their tax liability.

In addition to low costs, Mauritius also offers a range of professional services, including fund administrators and fund lawyers. These services can help fund management companies navigate the complex regulatory environment.

Mauritius has a strategic location that makes it an ideal hub for accessing African markets. This is a major advantage for fund management companies looking to expand their operations into the African continent.

Here are the key advantages of Mauritius fund/CIS manager companies:

To become an Approved Manager in the British Virgin Islands (BVI), you need to meet certain requirements. You must be a BVI company or limited partnership.

To be eligible, you must be proposing to act as the investment manager or investment advisor to a private fund, professional fund, or closed-ended fund domiciled in the BVI. This can also include foreign funds that invest substantially all of their assets in a BVI-domiciled fund.

You'll need to satisfy the Financial Services Commission's (FSC) fit and proper test, which ensures you have the necessary expertise and experience to manage investments.

As an Approved Manager, you'll have less onerous ongoing obligations compared to investment business licensees under SIBA. This means you'll have fewer regulatory requirements to comply with.

To give you a better idea of the different license options, here are the key features of each:

As a CIS Manager, you'll need to demonstrate that you have suitably qualified staff with the necessary expertise and experience to carry out the functions of a CIS manager. You'll also need to meet the requirements relating to eligibility, fit and proper, duties and obligations, rules of ethics, and other conditions specified in the FSC Rules.

You'll be required to maintain a minimum stated capital of US$ 30,000 and record an annual minimum expenditure of US$ 30,000 in Mauritius. Depending on your assets under management (AUM), you may need to hire a minimum number of qualified employees with the appropriate expertise.

In the United States, the Securities and Exchange Commission (SEC) is the primary regulator of investment managers. The SEC requires investment managers to register with them if they manage over $100 million in assets.

To obtain an investment manager license, one must first meet the SEC's requirements, which include having a minimum of 3 years of experience in the industry.

Investment managers are also required to pass the Series 65 exam, which covers topics such as ethics, investments, and financial planning. The exam is administered by the Financial Industry Regulatory Authority (FINRA).

The SEC also requires investment managers to maintain accurate records of their clients' accounts and to provide them with regular statements. This helps to ensure transparency and accountability in the investment management process.

Investment managers are also subject to the Investment Advisers Act of 1940, which regulates their activities and requires them to act in the best interests of their clients.